IAF: Sell Australian Shares By May And Go Away, Avoid 'The Most Expensive Bank Ever'

2025-04-24 11:04:12 ET

Summary

• abrdn Australia Equity Fund Inc faces challenges due to high fees and a lack of significant deviation from the ASX200 index.
• Australian shares, particularly bank stocks, are overvalued with limited EPS growth, making IAF's high expense ratio difficult to justify.
• The current 10% discount to NAV is modest and unlikely to contract due to the fund's high costs and index-hugging strategy.
• Given the recent rebound in Australian bank shares, this is an opportune moment to sell IAF and capitalize on the strength.

IAF Overview

The abrdn Australia Equity Fund Inc ( IAF ) is a closed end fund, or CEF, that invests in Australian companies listed on the Australian Stock Exchange. Its primary aim is to achieve long-term capital appreciation. Secondly, there is the objective of delivering regular income.

According to the IAF website , the fund has a net expense ratio of circa 1.7%. This seems like a challenging headwind to overcome to outperform their benchmark. This is particularly so when the fund continues to hug the index, such as maintaining a large weight in one of the most expensive bank stocks the world has seen....

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